In Part I of our review of Succeeding in a Dynamic World: Supply Management in the Decade Ahead, we overviewed the various external forces that will impact a company’s supply chain. In Parts II and III we took deep dives into the eight major forces that were identified specifically by supply managers who took part in the survey. In Part IV we focussed on some of the major impacts to business models and strategies in the decade ahead. In this post, we will address the new and expanded missions, goals, and performance expectations for supply management as identified by the report.
The report notes that chief executives will ask far more of supply management – requiring it to take on a broader, more strategic mission, evaluating it on a more comprehensive set of goals and expecting a higher level of performance. To accomplish this, supply management will need to expand its influence across functions, business units and geographies, go beyond the comfort zone of traditional success measures, and find creative ways to deliver even more value to the corporation.
The report than indicates that tomorrow’s missions, goals, and performance expectations for supply management will fall into four main areas:
- Delivering More Innovation From Suppliers
The need for innovation will accelerate as companies continue to pursue new geographic and demographic markets. With the demand and supply for innovation destined to be in a constant state of flux through the coming decade, and with the limited resources that will be available within any single company (thanks to the talent crunch), business will need to overcome the usual “not invented here” barriers and tap into all available sources of innovation on a global scale.
Companies will have to develop advanced approaches to how they identify external sources of supply, how they structure the commercial and working relationships with those sources, and how they make those resources an integral part of the product and services development process. Reinvention of the innovation model will be required to fully leverage external sources – and companies will need to formalize an ongoing process for sourcing innovation.
- Contributing More Broadly To Revenue Generation
Close attention to costs for goods and services leads to more competitively priced end products while a focus on quality and service reduces failure rates, improves availability, and leads to higher customer satisfaction and loyalty. However, some companies will expect even more. Some will seek to boost revenue by rapidly introducing products with a limited life-cycle to smaller, niche, markets. Other companies will seek to leverage the existing asset base and distribution channels to bring to market higher value or radically different products. Others still will ask supply management to take a lead role in finding new revenue streams using their unique knowledge of the business. And some will ask supply management to assist sales in co-selling products and services in one channel to suppliers of another channel.
In the first case, supply management will need to find suppliers and create processes that support entering and exiting these unique offerings quickly with speed, agility, and minimal waste. In the second case, supply management will need to develop or restructure the supply case to meet the needs and costs of the markets into which the company wants to sell. In the third case, supply management will need to assess, screen, and take a lead role in negotiating with the relevant external parties. In the last case, supply management will need to provide deep insights into the dynamics of upstream supply markets.
- Anticipating And Managing Supply Risk
Extended global supply chains that include geographically distant, unproven, and even unknown suppliers pose supply continuity, liability, reputational, and intellectual property risks. Changes in buyer-supplier market dynamics reduces predictability. Actions related to environmental protection, sustainability, and labor practices pose uncertainty. The volatility of commodity prices, currencies, interest rates, and even tax structures adds additional complexity. Risk is everywhere!
Supply management executives will be epxected to play a more strategic role in identifying and interpreting risks, and making tough decisions about risk exposure and mitigation. The level of sophistication required to manage the complex, wide-ranging portfolio of supply risks and integrate risk management into overall supply activities will need to increase.
- Expanding the Breadth And Impact of Cost Management Efforts
Performance expectations will be raised considerably as global competition forces companies to squeeze unnecessary cost out of every part of their business. For supply management, this will mean widening the breadth of spend areas covered, managing costs more holistically, and delivering cost savings faster. A range of tools and techniques will be used, including complexity reduction, greater standardization, tighter management of specifications and demand, compliance management, target costing, value analysis, value engineering, price benchmarking, statistical price modeling, should-cost analysis, expressive bidding, lean design, and Six Sigma.
Cost Management, Revenue Management, Risk Management, and Innovation management covers a lot of the bases, but I’d add at least the following:
- Supplier Management
Suppliers are going to become more critical to your operations as a whole – and this is going to require better management of not only their performance, but your overall relationships – as well as all of the data you collect about them, their products, and their operations. This will involve implementing and utilizing the next generation of SRM (Supplier Relationship Management), SPM (Supplier Performance Management), and SIM (Supplier Information Management) technology, which will eventually be unified in a common platform.
- Sustainability Management
Sustainability is the word on everyone’s lips these days and sustainability from social, environmental, and business perspectives will be critical. It will cease to be a secondary concern to cost, revenue, and risk management and many of tomorrow’s strategies will be designed with sustainability as the key priority.
- Talent Management
In a knowledge economy, talent is key. As talent becomes scarce, HR will be looking to supply management to help them identify available sources of talent within the supply chain to meet the organization’s needs via outsourcing, insourcing, and new types of talent sharing agreements between organizations, third parties, independent consultants, and semi-retired individuals.
After a break, this series will return with Parts VI through XII that will cover each of the seven critical supply strategies for succeeding in a dynamic world that were identified by the report.